Latest rate hike 'not in response to bank levy'

A major bank has announced further interest rate increases but says they are not in response to the bank levy.

Westpac has announced that owner-occupied interest-only rates will increase by 34 basis points to 5.83 per cent and investor interest-only rates will increase by 34 basis points to 6.30 per cent.

The group also announced an 8-basis-points reduction in variable interest rates for customers paying principal and interest on their owner-occupier home loans. This will take the standard variable rate for these owner occupiers to 5.24 per cent.

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These changes are all effective from 30 June 2017.

George Frazis, chief executive of Westpac Consumer Bank, said this is good news for owner-occupier customers who make principal and interest repayments as they will benefit from lower interest rates allowing them to pay off their loans faster.

“We hope the rate reduction will encourage owner-occupier customers with interest-only home loans to switch to principal and interest repayments, helping them to pay down their home loan in this low interest rate environment. There will be no switching fee,” he said.

“We understand the significance of interest rate changes to our home loan customers, so we try to balance the needs of both owner-occupiers and investors in making these decisions.

“APRA’s limit on new interest only lending is 30 per cent of new residential mortgage lending, so we have to continue to make changes to our interest-only rates and lending policies to meet this benchmark.

“Today’s decision is not in response to the federal government’s recently announced bank levy,” Mr Frazis added.